From the perspective of an issuer, deterioration in the issuer's credit profile may shift the issuer's sources of debt funding (e.g., from investment grade to non-investment grade markets). Moreover, outstanding debt may be traded at reduced market values due to a mismatch in terms relative to the current credit profile (e.g., coupon, covenants, maturity).
In this regard, there may be opportunity for significant improvement in the credit profile if the issuer can capture some of the economic benefit of the reduced market value of its debt (one embodiment of the present invention provides a synthetic mechanism for capturing the economic benefit—such a synthetic mechanism may have significant advantages due, for example, to reduced friction and tax costs).
From the perspective of a holder of the issuer's debt, a dislocation in investor base (e.g., from investment grade to non-investment grade) may contribute to reduced trading value and liquidity. Moreover, mismatches in maturity, covenants and coupons relative to the issuer's credit profile may represent impediments to determining fair value for outstanding debt.
In this regard, there may be opportunity for improvement in near-term trading value by “splitting-the-difference” relative to par with issuer and obtaining appropriate maturity, covenants and coupons debt (one embodiment of the present invention provides a mechanism for such “splitting-the-difference”).
Among those benefits and improvements that have been disclosed, other objects and advantages of this invention will become apparent from the following description taken in conjunction with the accompanying figures. The figures constitute a part of this specification and include illustrative embodiments of the present invention and illustrate various objects and features thereof.